Spain

Individual - Significant developments

Last reviewed - 04 February 2021

Over the past 12 months, the following significant reforms have been made to Spanish law on direct taxation of individuals:

On 31 December 2020, Law 11/2020, of 30 December 2020, was published in the Official State Gazette. The main measures contained in the Law were the following:

  • Some amendments are introduced in personal income tax with effect as from January 1, 2021, aimed at increasing the taxation of the highest incomes both in the general taxable base and in the savings base that taxes income from capital. In this respect:
    • A new tranche is introduced in the tax scale applicable to the general taxable base, raising the taxation of income that exceeds € 300,000 by 2 percentage points.
    • In the same way, the scale of withholdings and payments on account applicable to taxpayers who obtain employment income is modified, introducing a new tranche starting at € 300,000, with an applicable rate of 47%
    • The taxation scale applicable to the State and regional savings base is also modified, increasing taxation by 3 percentage points (from 23% to 26%) for savings income that exceeds € 200,000.
    • Likewise, the joint limit applicable to all contributions by the same taxpayer to social welfare systems is reduced to the lower of the following: a) € 2,000 (before € 8,000) or b) 30% of the net employment and business income
    • The limit will be increased by € 8,000 when it comes from business contributions.
    • The limit of the reduction for contributions in favor of the spouse when the requirements are met is reduced to € 1,000 compared to the previous € 2,500
    • The limits for the application of the objective evaluation method are extended during 2021
  • Wealth Tax is reestablished indefinitely (without the need to extend Wealth Tax annually).
  • Additionally, the marginal tax rate is increased from 2.5% to 3.5% for the part of the taxable base that exceeds € 10,695,996.06 provided that the autonomous community has not approved a different scale 

    On 23 December 2020, Royal Decree Law (RDL) 35/2020, of 22 December 2020, was published in the Official State Gazette. The main measures contained in the Law were the following:

    • Deferrals of tax liabilities are made more flexible for small companies and the self-employed
    • Reductions are increased in 2020 and 2021 in the objective evaluation method in personal income tax and for the fee accrued by current operations under the simplified VAT regime –
    • Tax incentives are established to encourage the voluntary reduction of rental income during the first quarter of 2021 by landlords (natural persons) who rent premises in which activities related to tourism, hospitality or commerce are carried out. –
    • The term is reduced from 6 to 3 months for the amounts owed by the tenants to be considered a doubtful balance for landlords (natural persons) in FY 2020 and 2021
    • The wording of the exemption provided for in-kind employment income for the company canteen service is modified to make it applicable also to cases remote work –
    • For Fy 2020 and 2021 the term for the deductibility of losses due to impairment of credits derived from bad debts for SMEs and the self-employed is reduced from 6 to 3 months
    • A VAT rate of 0% is established until 31 December 2022 for intra-community supplies, imports and acquisitions of vaccines and health products for the in vitro diagnosis of SARS-CoV- “and for the provision of transport, storage and distribution services related to them. -

    On 22 April 2020, Royal Decree Law (RDL) 15/2020, of 21 April 2020, was published in the Official State Gazette. The main measures contained in this RDL that affect the taxation of individuals are the possibility to waive the objective assessment method in personal income tax (PIT) and the simplified value-added tax (VAT) system without being mandatorily linked to this method for three years.

    On 1 April 2020, RDL 11/2020, of 31 March 2020, was published in the Official State Gazette. The main measure contained in this RDL that affects the taxation of individuals is the introduction of a stamp duty exemption in certain novations of credits and mortgage loans related to the acquisition of the habitual dwelling due to the COVID-19 economic impact.

    On 5 February 2020, RDL 3/2020, of 5 February 2020, was published in the Official State Gazette. Under this RDL, amounts received from pension plans in cases of serious illness or long-term unemployment, or corresponding to contributions made at least ten years previously, receive the same tax treatment as pension plan benefits.